The U.S. Federal Trade Commission, alongside a bipartisan coalition of 22 states, has filed a major lawsuit against Amazon, accusing the e-commerce giant of illegally inflating prices for advertisers. The complaint, filed in federal court in the Western District of Washington, alleges that Amazon surreptitiously manipulated ad auction pricing rules starting in 2019, extracting $20 billion or more from businesses that rely on its platform. State and federal regulators intend to seek tens of billions of dollars in financial damages and civil penalties.
At the center of the dispute are the second-price ad auctions that determine which sponsored product, brand, and display advertisements appear alongside customer search results. According to the FTC, online ad auctions occur in fractions of a second after a user enters a search term. Regulators allege that Amazon secretly stepped into these automated auctions, placing its own bids in up to 80 percent of sponsored product auctions to artificially drive up the minimum prices required for third-party sellers to land ad spots. The agency argues that advertisers were left unaware of this direct intervention, leading to inflated marketing expenses that ultimately translated into higher retail prices for everyday consumers shopping on the site.
Amazon strongly contested the allegations in a public response, arguing that its ad mechanisms are designed to match shoppers with the most relevant products rather than unfairly extract fees. The company stated that the average cost per click for advertisers remained flat from 2019 to 2024, while average winning bids for sponsored search ads dropped by half between 2019 and 2025. According to Amazon, these pricing structures saved advertisers roughly $8 billion over a four-year period while generating higher sales volumes for merchants, contradicting the regulator’s claims of consumer and economic harm.
The legal battle lands as Amazon’s advertising division cements its role as a critical engine of corporate growth. Now the world’s third-largest digital advertising power behind Google and Meta, Amazon saw its ad sales climb 26 percent in the second quarter to $19.8 billion, following an annual ad revenue of $68.6 billion in 2025. Following news of the FTC filing, Amazon shares fell roughly 2.5 percent.
This lawsuit represents the latest in a series of regulatory head-winds for the Seattle-based retailer. Amazon previously agreed to pay $2.5 billion in fines and refunds over allegations regarding Prime subscription practices, and the company is preparing for a separate trial over FTC claims that it holds an illegal monopoly over seller pricing power.
